From: Eliot Cohen [ecohen@aya.yale.edu]
Sent: Sunday, November 02, 2003 12:46 PM
To: rule-comments@sec.gov
Subject: S7-19-03:
Dear Friends,
I am very disappointed with the SEC's overly narrow and complex approach to
providing shareholder access to the proxy ballot.
Specifically, I feel the high share ownership threshold for nominations is
unnecessary; the shareholder proposal threshold of $2000 for one year is
sufficient and has proven effective.
The "triggering event" portion of the proposal is ludicrous. The triggering
event is that virtually all public companies use election procedures that deprive
shareholders, the owners of the corporation, of a meaningful role in the
nomination process and real choice on the proxy ballot. The current process is
a sham, and the SEC, charged with protecting the interests of shareholders,
should create a system that gives shareholders genuine choices, not tinker at
the margins with the current system by which, for example, 99.99 percent of
voters could withhold authority for a director and see him elected by a 0.01
affirmative vote.
Let's stop pretending the current system does anything except protect
entrenched management and boards. Honest people, particularly corporations and
directors, should insist on reform since participation in the current, corrupt
system taints them. I urge the SEC to abandon its current approach that nibbles
at the margins of a failed system and move toward genuinely opening the corporate
ballot to shareholder nominations to create free and fair corporate elections.
A free and fair corporate election system would be guided by these principles:
a.. Any qualifying shareholder may offer nominees for directors; those nominees
would not need to meet any shareholding requirement. (Any shareholding requirement
for nominees must apply equally to management/board and shareholder nominees.)
b.. Contested elections, with multiple nominees for director seats, should be
considered the norm.
c.. Broker voting would not be allowed.
d.. As in civil elections, voters-- in this case shareholders-- are trusted to
make sound judgments.
e.. Nominees and their supporters, not the corporate treasury, would finance
campaign expenses.
Before closing, let me weigh in on two spurious arguments that are being
repeated loudly in opposition to the SEC's unsatisfactory proposal as well as
genuine reform.
First, there is the argument that allowing nominees other than management's
will result in fragmented, paralyzed or acrimonious boards that will harm
shareholder's interests.
In a free and fair election system, management would be able to make this
argument in campaigning for its slate. Assuming management nominates reasonable
candidates who seem ready to perform in the best interests of shareholders (and
those interests should be aligned with those of directors and managers), then
shareholders are likely to be convinced and those nominees elected. Managements
that nominate such slates should welcome the opportunity to give them legitimacy
through free and fair elections and trust shareholders to choose wisely.
Second, there is the argument that opening the ballot to shareholders would
threaten to allow "special interests" to join the board to the detriment of the
corporation and shareholders at large. All of the reasons to ignore the argument
above apply to this one, with the additional note that the current system is
hostage to the "special interest" of entrenched management and boards.
Again, make the election system fair, trust in shareholders to act in their
own best interests, and accept that shareholders, as owners, should have the
right to elect directors freely and fairly.
I trust these comments will be helpful to the SEC to formulate rules that
will genuinely open the corporate ballot to the owners of the corporation, the
shareholders, and set the stage for boards of directors that are accountable to
shareholders and provide effective, independent oversight of management.
Thank you.
Sincerely,
Eliot Cohen
ecohen@aya.yale.edu